Latest Research

Our beginning-of-the-year message—“lower your expectations and be patient” has largely been true so far this year as most equity markets tracked the historical pattern pretty closely.

Strength in the Energy sector has been so compelling that our two recent Energy group allocations together now make up a 10% portfolio weight, after having no Energy exposure from June 2013—April.

We sense that the lack of volatility in the stock market in recent months is beginning to unnerve even the bulls, who seem increasingly compelled to do something in response to the relentless new highs.

As a follow up to a 2012 Special Study, we examine the growth in Electronic Payment Systems. Global competition in the industry has significantly heated up, as more countries are setting up their own national payment systems, relying much less on the “big four” global giants.

Although Valuations are a headwind for the asset class, at the stock level our disciplined multi-factor model indicates best opportunities are Small/Mid Caps, and Hotel & Resort-oriented names.

Low Quality Momentum persists, and a look at how Valuation factors affect the Quality model output.

Small Caps have staged a nice rebound in the last several weeks. On July 3rd, the Russell 2000 rose to within a fraction of an index point of its March 4th all-time high. But on a relative strength basis, the bounce has been pretty muted.

We certainly have nothing against dividends, but for more than a year we’ve believed that high-yielding themes like the Utilities, REITs, and the S&P Dividend Aristocrats have become so popular they’re likely to disappoint their new owners for a while.

Managed Health Care, Property & Casualty Insurance, and Railroads highlights.

We’ve been negative on commodities and most commodity-oriented equities for the last three years, believing that the magnitude of the ramp-up in commodity production capacity over the last decade remains generally underappreciated by investors.

We’re still bullish, but nonetheless feel a duty to take issue with some of the popular story-lines that have attended the past two years’ rising prices.

The level of this index is in an extreme zone where false alarms are more likely as small movements in the index can trigger new signals.

Two short-term, options-based sentiment measures have just swung to levels consistent with near-term difficulty for stocks. Current reading is the most bearish combination of smart-money caution and dumb-money confidence in 10 years.

The breadth of new market highs across multiple market indexes illustrates beyond a doubt that the stock market is “externally” in gear, but some analysts contend the market is showing “internal” signs of weakness.

Our Bull Market Confirmation Indicator is tallying a healthy reading. This is intermediate-term bullish, and suggests that a final bull market top should be a minimum of four to six months away.

The fundamental backdrop remains favorable for high grade credits.

Current conditions remain cyclically bullish for equities, however, the mathematics don’t support the  “secular” bull market thesis, or those betting that stocks can be propped up by the economic expansion.

It’s often said the best bull markets surprise even the bulls, and the current one has certainly done that.

Unfortunately, the upswing since early 2009 can be considered immature only from the perspective of its age. The math just doesn’t support the secular case.

Easy earnings growth days are behind us.